Correlation Between King Strong and Shannon Semiconductor

Can any of the company-specific risk be diversified away by investing in both King Strong and Shannon Semiconductor at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining King Strong and Shannon Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between King Strong New Material and Shannon Semiconductor Technology, you can compare the effects of market volatilities on King Strong and Shannon Semiconductor and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in King Strong with a short position of Shannon Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Strong and Shannon Semiconductor.

Diversification Opportunities for King Strong and Shannon Semiconductor

0.55

Correlation Coefficient

King Strong  Shannon Semiconductor

Very weak diversification

The 3 months correlation between King and Shannon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Shannon Semiconductor Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shannon Semiconductor and King Strong is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on King Strong New Material are associated (or correlated) with Shannon Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shannon Semiconductor has no effect on the direction of King Strong i.e., King Strong and Shannon Semiconductor go up and down completely randomly.

Pair Corralation between King Strong and Shannon Semiconductor

Assuming the 90 days trading horizon King Strong New Material is expected to under-perform the Shannon Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, King Strong New Material is 1.5 times less risky than Shannon Semiconductor. The stock trades about -0.04 of its potential returns per unit of risk. The Shannon Semiconductor Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,925  in Shannon Semiconductor Technology on December 25, 2024 and sell it today you would earn a total of  858.00  from holding Shannon Semiconductor Technology or generate 29.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

King Strong New Material  vs.  Shannon Semiconductor Technolo

King Strong New

Risk-Adjusted Performance

Very Weak

Over the last 90 days King Strong New Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, King Strong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shannon Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shannon Semiconductor Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shannon Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with King Strong and Shannon Semiconductor

The main advantage of trading using opposite King Strong and Shannon Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if King Strong position performs unexpectedly, Shannon Semiconductor can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shannon Semiconductor will offset losses from the drop in Shannon Semiconductor's long position.

The idea behind King Strong New Material and Shannon Semiconductor Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.